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Thursday, July 2, 2009

What Is NEXT For Construction Industry ...

The positives signs were clearly emerging for the country’s construction sector, thanks to subsiding uncertainty, a smooth political transition, government pump-priming through two stimulus packages and cheaper input costs.

Another reason for increasing optimism about the construction sector is the recent upgrade of the Malaysian market and investors’ increasing preference for higher-beta plays such as the cyclical construction stocks.

12 mega projects valued at up to RM80 billion, in which a bulk of them was not part of the government’s stimulus package. Leading the pack would be the Klang Valley light rail transit (LRT) extension and upgrade, which is expected to worth between RM30 billion and RM35 billion.

Syarikat Prasarana Negara (SPNB), which is the asset owner of public transport in the country, is expected to call for tenders as early as July 2009. IJM Corp, WCT, MRCB, Gamuda and UEM Builders Bhd are potential winners of the LRT job.

Meanwhile, another project that could be awarded soon would be the RM1 billion to RM2 billion water infrastructure project in Sabah. WCT might clinch the award, given the experience it gleaned from the Kudat water supply scheme.

There would also be two biggest private finance initiative (PFI) jobs, such as the RM5 billion Gemas-Johor Bahru double-tracking project (DRB Hicom) and the RM2 billion new low-cost carrier terminal (LCCT).

While the LCCT terminal was featured in the 2nd stimulus plan and is a fast-track job, the double-tracking project is likely to involve the participation of a Chinese contractor, similar to the structure of the RM4.3 billion Second Penang Bridge where China Harbour Engineering Company (CHEC) partners UEM Builders.

Positive surprises from the progress of the Bakun power transmission could be expected in the second half of 2009. Thanks to cheaper steel prices, the progress of the Bakun power transmission project may take off sooner rather than later as its cost has come off from RM14 billion to RM9 billion.

Among the two to three local players, MRCB stands a high chance of emerging as the key beneficiary given the experience it gleaned from undertaking two major power transmission jobs in the country.

CK Kok

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